Finance Committee

So, we'll move on now to the next item, but, before we do so, I'd like to pay tribute to and express our deepest sympathies to the family of Hefin, who would have been here with us this morning. Hefin is deeply missed and his absence is felt particularly here today because he was one of the Senedd Commissioners and often dealt with us as a committee. So, I'd like to pay tribute to him this morning and say that we will miss him greatly, and, I'm sure, on behalf of the committee, we do extend our heartfelt condolences to his family and colleagues.

But I'd also like to welcome you here this morning as witnesses to the Finance Committee, and I'd like to ask you to introduce yourselves for the record, please. We'll start with the Llywydd.

I'm Elin Jones and I'm Llywydd, Presiding Officer, of the Senedd. If I could reflect on your words about Hefin David, it's difficult to believe that I am here before you this morning. The final conversation I had with Hefin before the summer was on the very budget that we're discussing today, and it was clear to me that Hefin David had, as Commissioner with responsibility for the budget, brought enthusiasm and seriousness to his work as Commissioner over these past years. So, I will lead on the budget for the time being and perhaps through to the process's completion. But thank you for your kind words about Hefin. So, I'm Elin; I'll ask Lisa to introduce herself next.

Bore da. Lisa Bowkett, chief finance officer.

Thank you.

Bore da. Manon Antoniazzi, clerc a phrif weithredwr.

Diolch yn fawr.

Ed Williams, director of resources.

A warm welcome to you this morning. As we've already mentioned, we'll be discussing the draft budget for 2026-27 for the Commission. Could you just start this morning by explaining the process that you've gone through and how that links in with the committee's statement of principles in terms of priorities and targets and intended outcomes of the Commission and how they are reflected in what you've presented to us?

Well, the process of formulating the Senedd budget for next year and presenting that, for the Commission and the Commissioners themselves, started back in April when there was a paper on the medium-term resource framework. I'm sure you'll be familiar with that; that sets out the sums for the funding of the Senedd in the medium term. And then, following that initial conversation and following the agreement of that paper, by June, the Commission then considered a paper from officials that had been assessed in more detail in terms of the exact requirements of the budget for the next year, the building blocks for that budget, if you like. And then there was a consultation with Members through the political groups on some of the figures and estimates in that budget, which led to the refinement of the budget over the summer, and the Commission, in its last meeting a few weeks ago, took a final decision on the budget.

So, that's the process in terms of Commissioners. Of course, the figures and the work that are at the heart of all of that do come from officials in terms of the various different departments, who set out their requirements in terms of the budget, and looking at the change plans that we have—two significant projects, one on Senedd reform and the other on the requirements and needs in relation to Bay 32. Therefore, that work is ongoing.

The principles set out by this committee are central to that, that fundamental principle of not thinking for one moment that we will get anything that anyone wants at any given time, that we should budget very carefully and prudently and test everything in terms of the needs and requirements and the demands of the economy and the demands on the public purse. I'll ask officials, perhaps, if you want more detail as to how those principles work in detail as we develop the medium-term resource framework that then leads to the budget.

One of the things you mentioned was engaging with the groups and the Members. How has that engagement affected the budget? How did things change, possibly, as a result of that consultation? I know that that was something that Hefin had been doing with us. So, there was enthusiasm in terms of receiving the feedback, but how is that reflected in your final budget?

Most certainly, yes, Hefin David had committed to having more consultation with Members in developing the budget. Looking back at what he pledged to do in this very committee last year, it was to undertake that consultation with Members and groups earlier in the budgetary process, so that that consultation could be more meaningful in terms of its influence on the budget.

This year, the three political groups were offered a consultation session on the budget, and Hefin led on that work. That happened earlier in the process this year; it happened in June, whereas—. Last year it happened in September, and Hefin himself acknowledged that that was late in the process.

So, following the feedback of those groups—the Labour and Plaid Cymru groups—there was refinement of the budget during the summer. Specifically, I think the part of the feedback that Commissioners were particularly eager to look at was in relation to the fact that the determination and Senedd reform did mean change—this is the budget that substantially changes the expenditure on Senedd reform—and that we should look at what the reality of that expenditure will actually be next year, as compared to what the maximum spend could be. We know, as new Members are elected to this Senedd, or as the work of a new Senedd commences at the beginning of any parliamentary term, that that is a process of increases as the months progress. No new Member can employ three members of staff within a week of being elected to this place, for example.

There are changes related to Senedd reform in terms of how much additional work the next Senedd will want to do, as they will have greater capacity. Some of those decisions will be for the next Senedd. So, it will take a matter of weeks, perhaps months, for those decisions to be taken by the Senedd before that is then reflected in the number of staff required to deliver that from the Commission side, in terms of new committees, for example. So, that will be presented later in the financial year.

And over the summer—. I'm sorry, this is a long response. Over the summer, we have done some work in trying to actually land that expenditure on a more realistic level, rather than at the maximum level that it could be.

Okay, thank you very much. You've mentioned, and we see from the papers and the draft budget, that there is a significant increase in the expenditure that you are requesting and the money that you are asking for. Could you outline what that means, and could you break that down? And also the risk if the Welsh Government's budget is not passed—what is the risk for the Commission as well?

Hefin David, in his foreword to last year's budget, said that this year's budget would be the phase 1 of the step change related to Senedd reform. We're now introducing phase 2 of that step change in the budget that will fund the work of 96 Senedd Members, and therefore the figures and costs have been set out transparently before you, as was the pledge from the outset—that we do differentiate between the business as usual and the increase in the number of Members—so that that's transparent to you as a committee, for the Senedd as we vote on the budget, and for the people of Wales too, of course. So, there is a substantial increase in the budget to reflect the additional costs of having more Members, and there are also other aspects that mean that there is an increase in some of the budget lines.

Of course, as we move forward, we know more about the exact costs of the various aspects of Senedd reform, for example, the Chamber, and you may want to discuss that at some point. And also we now know what the discussion is regarding staff salaries—that's Commission staff salaries—with the negotiation on the pay awards for next year, and also what the determination of the remuneration board is on funding Members and Member support staff.

Mike.

We know that other services, such as health, for example, if the budget isn't passed, they get 85 per cent of what they had this year. Are you affected in the same way? Would you get 85 per cent? And, if you do, good luck.

The Standing Orders mean that, if the Senedd budget is not passed, then it will be—what's the percentage—95 per cent of the current year's budget. And, of course, 95 per cent of a usual current year's budget is difficult but possibly manageable. In this situation, in this one-off situation, where it would be 95 per cent of this current year's budget to fund next year's budget, which has 96 Members and a 22 per cent increase in that budget, then that is, as you've, I think, alluded to in your question, a very tough ask—well, an almost impossible ask—for the running of the Senedd, with 96 Members to be funded within that envelope that would be available to the Senedd. So, it would require quite considerable—. 'We haven't even gone there' is what I would say at the moment, because it would be so difficult to think about what that would mean both for Commission staff, and the numbers of Commission staff, and, dare I suggest it, the payment of salaries of Senedd Members ourselves, or whoever they may be who are returned.

Thank you very much.

After the removal of ring-fenced budgets for Senedd reform and Bay 32, as well as depreciation and interest, the increase in total operational resource for the Commission equates to around 3 per cent. Could you explain the reasons for this, and how have you managed to get it to 3 per cent, where inflation is a little higher than that, to ensure that there is sufficient funding to do the BAU, as it were?

As I said at the outset, we do try and adhere to the principles that are central to the work of this committee. So, there is a challenge in our budgetary system that means that we do try and be as prudent as possible. The main driver of all of that is the pay settlement for Commission staff. In terms of business as usual, perhaps I could ask one of my officials to give a little more detail on getting to that 3 per cent.

As you mentioned, Llywydd, there have been many rounds of challenge to reach this budget. The increase is, to a certain extent, because of the staff salary settlement, and there is an element of inflation. But we are keeping an eye on the GDP deflator, as you know, in accordance with your statement of principles. We need to keep an eye on the climate generally in the public sector, and beyond that, we rely upon a challenging process of prioritisation to ensure that the costs remain within that cycle.

But if you're using the deflator, it's suggesting 4.07 per cent, rather than the 3.07 per cent that you're using.

As you saw last year, we do not use that as a hard target. We use that as something that we are aware of in setting the most prudent level possible for the provision of services that the Commission has asked us to provide. Last year, the deflator was lower and we came to the conclusion, if you recall, that it would be impossible for us to remain within those limitations, and we asked for more. But this year, we do feel that we can ask for a little less than that guideline.

How have the negotiations with the unions progressed? Where are you in that process in terms of salaries and the settlement? Because if I remember rightly, you tend to do it in multi-year periods, if you can.

In the current economic climate, it seems unlikely that we will be able to reach a multi-year agreement, but we have been negotiating with the unions, as you know, for this year. You will see what the offer on the table is within the draft budget. I will now turn to Ed, because he is the person in the room and can perhaps provide more colour in terms of the current situation.

Just to add to that that we’ve made a best and final offer. It’s a tapered approach. The staff budget before you is 3.75 per cent. We’ve been aware of the wider context of the UK civil service pay remit and the Welsh Government's advice to arm's-length bodies in terms of the pay remit there. We’ve had long, good negotiations. We’re not at a point where there is full agreement. The three trade unions that make up our trade union side are currently engaging with their members on our final offer. We believe it’s a fair and reasonable offer. As I say, the staff budget is at 3.75 per cent, the average award is just very marginally above that, but it is a tapered offer, with the bulk of staff getting 3.75 per cent and then different amounts above that.

Okay, thank you for that.

Just to finish, and before we move on to Mike, given that we are coming to the end of this Senedd and moving into a new Senedd, and this budget traverses those two periods, how are you as a Commission working through the personnel change in terms of Commissioners, possibly, that will happen? How are you making that transition and how are you working through this budget with an eye on how this will look after May next year, and having that continuity in terms of people sitting around the table as Commissioners?

There will be some change in terms of Commissioners. I will not chair the Commission after May, that is for certain. Perhaps I will have to ask officials how they undertake scenario planning for new Commissioners. But what we hope to present to the new Commission, and to the Senedd, of course, is a budget that will ensure that it will be possible for a new Senedd with 96 Members to have that capacity and some flexibility in delivering what that Senedd would wish to deliver.

Much of the work—we may look at Bay 32—will continue and will transition into the new Senedd, but providing the necessary resource for the next Senedd and the next Commission to flex up that work, as there will be more capacity in terms of Members, is something that is at the heart of the budget. How do we ensure that there is continuity in terms of Commissioners and the work of officials in accordance with that? I don't know what kind of scenario planning you're undertaking for that, but I probably wouldn't be told that.

The main thing, of course, in planning for change is trying to achieve flexibility, and it's difficult to have a great deal of flexibility without some contingency. And that's not part of our principles, aside from cases where there is great commercial uncertainty and high risk. So, generally we don't use contingency, but we have ensured that we've asked for what we think we need, and, of course, it is possible for a Commission in the future, or the Senedd in general in the future, to reprioritise within that total, or ask for funding through a supplementary budget.

Thank you. Over to Mike.

I'm going to ask these questions based on the belief that the budget will be passed. I don't actually believe it will be passed, but I'm taking it forward on that belief. How are you going to ensure that demands on staffing resources are realistic and manageable and that you don't overpromise what can be delivered within the available resources?

I don't think there's an overpromise here. I think that there's a realistic assumption, based on experience, in terms of what a new Senedd will be keen to do and expecting to do.

The unknown at the moment is some of the work in terms of what the timetable of that Senedd will look like with more Members and capacity—so, how many committees, how many Plenary times the new Senedd will want. There's an element of being able to prepare some of the groundwork for that. The Chairs' forum and the Business Committee are doing some work on some of the potential scenario planning around that, but some of these decisions will lie with the next Senedd, and should do so.

I don't know whether it's appropriate for me to ask a question back to the Member, given that you've just told us that you don't believe that the budget in front of us today will be passed by the Senedd. I'd like you possibly to explain to us what part of the budget you think is not acceptable to Members.

Not your budget, but the overall Senedd budget—

You mean the Welsh Government budget. Right, okay.

The Welsh Government budget. And we've heard the leaders of the two main opposition parties say loudly and clearly they would be voting against it.

I beg your pardon, Mike. I thought it was this budget that you referred to.

No. This budget is only a minor part of the whole, but it's also a major part of what you and Manon are responsible for.

I misunderstood you, so I apologise for that, and I'm sorry for being so cheeky as to ask you a question back, but it's clarified it in my own mind, so thank you.

I think it's always useful to clarify these things. It was suggested that the latest estimate of the cost of the Siambr refurbishment was £4.22 million. Is that in line with what you expected, and is the funding there for it within Senedd reform?

It is more than what was budgeted for in this financial year. I think that figure was £3.4 million. So, it is more, for the Chamber itself. That's mainly to do with two aspects, as I see it. One is that the budget estimate was prior to the tendering process for the building work itself. And then there's another element to it, where, during the process, some of the work that would have been needed in that Chamber, in terms of refitting cabling, for example, that was coming to the end of its life, the decision has been taken to fund that and do that now rather than face it in three or four years' time. So, that's added to the budget. In terms of whether it has required more budget for Senedd reform as a totality, then no. It's funded from within the Senedd reform budget, and there has been some reprofiling of that work in terms of staff projections. I don't know whether you want more detail from Ed or Lisa on that, or whether that's sufficient.

That's sufficient for me. Can I just welcome the cabling? As you know, when you're sat there, for a number of us, on occasion, it stops working, and we get a bit flustered. So, making sure that that doesn't happen will be a great benefit to all of us.

We've foreseen the work that would have been needed to have been done in three or four years' time and done it now in order to lessen the impact on the public purse of actually doing it later on. But we've had to take a bit of an increase in the budget in order to do that for this financial year.

It wouldn't be me if I didn't ask these questions: what are you doing in terms of finding efficiency savings and productivity improvements within your existing budgets?

I hope that the fact that we've been able to produce a budget this year that is 3 per cent, 3.07 per cent, for our business-as-usual budget—. That's mainly driven, as I said earlier, by the pay settlement for staff, and that's well within the GDP deflator of this year. I hope that shows that, in terms of the headline, it is a budget that is responsible in the context of the public purse. I don't know the exact mechanisms for landing us on that in terms of the planning on the budget. Maybe Manon and Ed can come in.

I can certainly elaborate on that. The engine that we have to look for savings is the medium-term resourcing framework. We've talked to you about this one before. We're on a rolling basis, we refresh it in the early spring of every year, and that is how we have a robust forward look, foresee costs as best we can, refined as we get closer to the current year, and decide on our strategy for mitigating the challenges, and planning accordingly. That means, again, multiple levels of challenges to the budget before it arrives before this committee. We make sure that the resources that we have then are aligned with Commission goals, and we operate on that basis.

Just to amplify, we have a target establishment for our staff. Staffing costs are the large bulk of the Commission's operational budget, and this is, I think, the third year in a row where we've held that flat. So, I think, in a key area of the budget, you can see us driving efficiency. Also, we're now doing more detailed efficiency planning—that's led by our chief finance officer, Lisa, over here—as part of our service planning exercise. We're now asking each service area to be more specific about efficiencies. We've got a good story to tell there. I'm happy to go into detail in terms of the first year of that endeavour, although some of that is cost avoidance. So, we've got a good story to tell on efficiencies now, but we're going to keep going and look for those continuous improvements and those multi-year efficiency drives. But it's now a much more specific part of what we're doing.

Thank you very much.

Diolch. Sam.

Thank you, Chair. Good morning, all. Thanks for being with us this morning—it's appreciated. Just on some of the staffing points, you have what's described as an establishment figure for permanent staff, and then, of course, there is a ring-fenced group of staff linked to Senedd reform. Do you expect, once those changes have happened, those ring-fenced staff to be included in that establishment number, or will the baseline number of staff in the Senedd Commission revert back to what they were previously? What's the expectation?

The way that we see the budget going forward is that all aspects of Senedd reform will become baselined into the next budgeting period. So, that would be the same for staffing, but all the costs associated with any changes to staffing or changes within the business as usual. So, Senedd reform will disappear as a concept, and the reality of it will be carried on into 2027-28. So, I'm guessing the answer directly to the question is that the target establishment figure will change at that point to reflect the new reality of a larger Senedd.

Okay. Thanks. So, just looking at the Senedd reform staff costs and the FTE associated with that, it suggests that existing posts linked to Senedd reform is 49.7 FTE, new posts at eight as of April 2026, and an additional 38 posts in the future as well. So, all of that staffing will be included, then, in the new establishment—is that right?

It will, if it materialises. So, on those 38 posts, there is some element of a question mark on whether they will materialise in those exact numbers, because some of that is the flex I referred to earlier in terms of the decisions that the new Senedd will take in terms of the exact nature of the employment that's necessary.

Okay.

Sorry, you might go there first. You carry on.

I was going to say—and maybe we're on the same page—that I would have thought some of these posts would be linked to the delivery of the project itself, though, and obviously, once a project has been delivered, in terms of the space being changed and some of the new processes that would be in place with an expanded Senedd, I would have thought some of those posts would no longer need to be in existence. Have I misread that, perhaps?

Well, during this process of Senedd reform, within the establishment figure that we deal with and with the additional posts that have been employed in this financial year, as well as possibly in the next financial year, some of that has been around how the various services plan and include within their work the role of Senedd reform. So, I understand the point that you're getting to, that we've had a set of people who just do Senedd reform and they won't be needed in the next Senedd. I don't think it's as clear cut as that in terms of the individuals and the work that they've done. There have been a lot of people doing different kinds of work during the different period of Senedd reform. I don't know whether you want to reflect on that in a bit more detail than I've just done.

The bulk of the staff are there to serve the new Senedd, so it'll be an ongoing duty for clerks and lawyers and so on. Ed, it's your area, the project planning for the EFM changes, which might be more affected by decreasing demands, although there will be new demands, of course.

The bulk of the permanent staff that we're taking on—. There is a small number of temporary posts that have helped us through the change, but certainly, on the works projects that have been a major part of the Senedd reform endeavour—the changes to Tŷ Hywel and the changes to the Siambr—that is bought-in expertise through works contractors and architects that we don't keep permanently on our staff, so they haven't added to that baseline. And then, in terms of the Commission's core staffing requirement, those posts that you talked about coming onstream this year, those are posts that we believe—and that's been a rigorous process—are needed to support an expanded Senedd from day one. There are certain activities and functions that need to be delivered for all Members for the Parliament from day one, and then there are those that are seventh Senedd dependent—that's the language that we use—and you'll see that those have been put in to either 1 April, although those are very likely to be needed, and then the other staff for September. The Senedd Business Committee, the Commission, will have to make some decisions, or we're anticipating will make some decisions early in the seventh Senedd, and those posts are dependent on those. Nevertheless, in terms of, say, Members' business support activity, ICT activity, there are some core activities that will be needed from day one where we need that staffing resource now trained up and ready to be operational.

Chair, was that a similar question to what you were going to ask, or—

Similar, but following on from that, then, if you're saying that there are some staff that will possibly kick in in September next year rather than in April or May, and I assume that's then profiled through what you're asking for, so you're only asking for a half year's worth of salary rather than a full year's salary, so it's that aspect of phasing in of staff, and, of course, if it doesn't pan out the same way as you'd anticipated, then you've got the opportunity to revise that in a supplementary budget to reprofile those if you needed to.

Absolutely, and, in addition to that, that's why we're keeping the ring fence for next year. We're not ending it at the point the seventh Senedd begins, for transparency reasons and because any unused resource will go back to the public purse and won't translate across into the Commission's baseline.

Thanks, Chair. Just on this theme, I wonder if you reflect on the fact that the public sector more broadly is likely to have to make quite significant staff cuts over the coming years. The Senedd Commission has increased its staffing since 2018 by 10 per cent, so an additional 45 FTE has already happened, and plus it's showing an additional 96 FTE into the next Senedd, so a further 20 per cent. So, we're looking at a 30 per cent increase in staffing for this place, whilst public service and the front line are likely to face significant challenge in terms of their staffing numbers. Do you think there's a role for the Commission to play to explain that to the public and also to public service partners when councils or the NHS are challenging themselves around staffing, and this place is increasing staffing by 30 per cent?

Well, I'd make an attempt to explain some of that, and others can come in on the figures themselves. What we are asked to do as a Commission is to meet the needs of the Senedd. At different times, the Senedd increases its ask of the Commission. During this Senedd, there have been, at different times, increases in the number of committees. The Senedd has requested that there would be a COVID inquiry committee, that there would be committees on Senedd reform itself. Those committees always need to be staffed and supported, so a lot of the flex that you refer to in some places is driven by what the Senedd requests of the Commission. The COVID inquiry committee is one where we needed to respond to the Senedd's request for a committee that was unexpected to the Commission and needed to be funded and staffed in that way. That's part of where the Commission has to respond and respond in staffing. Staffing is the main contribution that the Commission can make to supporting committees.

In terms of the actual percentages you referred to there, I'd need to double-check that the point that you make about the 30 per cent is an accurate reflection on the increase in the establishment figure you said from 2018.

The large increase is happening between the end of this year and the beginning of next year, and is linked to Senedd reform. That is why we have kept the Senedd reform costs in a ring fence so that that is transparent and clear. That is done because we have been mandated by the Senedd to prepare for this change. I think that's the main point that I have to make.

You were referring to the total, including Senedd reform, with that 30 per cent.

The staffing numbers in 2018 were 444.6 FTE, and at the end of this financial year just gone 490, so that's the 10 per cent in that period, and then we talked about 95.7 additional FTE, as you confirmed a moment ago. My rough calculations are that that is 20 per cent on top.

That's primarily driven by Senedd reform.

Yes. I guess my point is—. You're absolutely right—it's the Senedd itself, the decisions the Senedd makes in terms of driving some of those numbers, and I guess we also need to reflect on how that looks to the broader public sector when they are facing significant challenges.

On the point around productivity that Mike Hedges raised earlier, I guess one of the apparent shining lights in the future is around AI. I'm not necessarily convinced myself about some of this stuff—perhaps it's my ignorance or naivety. I just wonder how the Commission is looking to technology like AI to help drive productivity or some sort of efficiency, and whether that's able to be quantified in budget planning at all.

Well, I endeavoured to answer a question on the floor of the Senedd last week on this, and I showed some of my own personal ignorance on the use of AI. I think we're in the early stages of all of this, of working out what it means for the kind of work that we do as a Senedd. I think we should seek to embrace the opportunities within it and make sure that we are ensuring the safety of all of us and the integrity of our work in doing that. We see it primarily as a tool to make our work more effective and to use it in that context, not as a replacement tool, but in order to ensure that we're all able to spend less time doing what something else can do for us and more time doing what is important that humans do. So, I see it in that context. There are people here—. Who do I look to at this point? Who is—? Ed, or you, Manon?

Well, only to the extent that I can echo what the Llywydd says. We're making use of AI cautiously and with an eye to governance and security. We are seeing some productivity gains in terms of streamlining routine tasks and minimising manual intervention, which frees staff up to look at higher value work. It is a little early for us to be able to quantify the value of that in budgetary terms, but it is something that we're actively working on.

Yes. Thanks.

Other than it does have an influence on some of our ICT asks, of course. In terms of licences, you know, one of the issues that the Commission itself has looked at is the ICT provision for Members returning and new Members in May, and whether it should be mainstreamed, that Copilot—I'll show my ignorance now; I don't even know the term—within Microsoft and should be available to all Members or only on demand. So, there are some finance issues in terms of engaging wholly with AI in terms of ICT as well.

Thank you. I guess it's a management decision, because, sometimes, these things can be more work and actually make us less productive because of the hassle that they cause at times. I guess that's a management decision there. Chair.

Is there a risk of overestimating how much money could be saved or how efficient we can be in these early stages? How are you managing that from a budgetary point of view? Are you being more cautious than you might be with, maybe, an established technology?

Ed.

I think it's fair to say—. I referred earlier to our more defined efficiency programme, and we're looking for those opportunities. We're a long way away from setting targets and really being able to quantify in budgetary terms. We're trying to adopt a positive attitude, looking at it in terms of opportunities, how we improve our services to Members and to the Senedd. We're having those conversations and there's a work stream around those opportunities, alongside a work stream where we're making sure that what we offer is safe and secure in terms of that ICT environment and high quality. So, yes, we're trying to balance those risks. It's early days, but it's a live conversation internally. So, we're alive to the issues being raised, for sure.

Thanks. Llywydd, you mentioned the potential for some security issues, perhaps, with some of the IT at the moment. We've seen elsewhere some of our most beloved supermarkets and Jaguar Land Rover recently also getting impacted by what may be state actors in terms of ICT security. I'm just wondering how you've considered that within this budget, ramping up security, if necessary, around our ICT to ensure that we're able to continue to function as a Senedd appropriately?

Well, it will have been considered within the budget, because cyber security is as much on our minds, in terms of planning and investment, as it is on almost any other public sector or private sector going forward. Some of the issues, of course, are reflected in the work that our ICT people do at all times. Ed can go into a bit more detail, perhaps, on the level of cyber instances or attacks that we face daily. And the need to make sure that everything that we have is up-to-date in terms of security does then, of course, require investment as we move to a more cloud-based ICT technology that enables us to retain and be more up-to-date, but then, of course, there is a financial consequence to that in terms of licences on ICT. Ed, do you have anything more?

Could I just say that, in addition to that, as well as the licences, we've increased our staffing resource and also we've put in place a 24/7 security system? It would probably be better—. If the committee's interested, we'd be very happy to provide a note on what we're doing on cyber security. There is a lot to say. The threat has definitely increased and, again, I'm happy to go into that in more detail; it may be something, as I say, that you may wish to know more about.

That could be very interesting to have a note on that.

Yes.

With the world that we're living in with social media as well—and that's something that came up through this committee and other committees—with regard to bad faith actors in terms of posting and monitoring, that was something that I think the Commission was going to look at and see what sort of support there might be for Senedd Members and staff in terms of potentially getting hate attacks and things online. Is that something that you've progressed? And is there something within the budget that's been allocated to look at that aspect of things?

Yes, it's been progressed, and the Commission, in its last meeting, agreed to undertake a pilot of social media monitoring in the context of Members and their support staff. This has been done in conjunction with the women's caucus in particular, where some of the asks for the Commission and support from the Commission came from.

So, that pilot itself will follow, to a certain extent, the Scottish Parliament model of monitoring in this context. It's for this financial year and this Senedd, so the pilot will be over the next six months and it's funded from within usual work during this budget—it doesn't require additional budget ask. So, that's ongoing and we'll make sure that this committee and all Members, actually, are involved in that, but also, of course, see the work of the pilot. And it'll be for the next Commission and Senedd to decide on whether it wants to mainstream that work for the next Senedd.

And that would be something where, within this budget for next year, there would be that ability to be able to take that on board from within the budget, rather than having to ask for additional funding to be able to do that.

It depends to some extent, if I may, on the results of the pilot. But then it would be a project that would be, obviously, very highly prioritised, I'm sure, in the context of how we distribute and think about the projects next year.

If it's of some comfort to the committee, I should add that our audit and risk assurance committee is particularly interested in cyber security and has had several deep-dives into this, so we feel that our approach to business continuity and to cyber security is under constant scrutiny.

Diolch yn fawr.

Thanks, Chair. Just a brief final question from me, before others perhaps jump in. Just moving our focus on to the 2032 project—sorry, the Bay 32 project. We're aware, of course, that the lease for the building that we're sat in at the moment, Tŷ Hywel, ends in 2032. I just wonder, briefly, if you could give us an outline of the timeline of decisions and announcements that you're expecting to make over the coming months in particular.

Yes. You'll be aware, though, that we're in a live competitive tender process at the moment with potential parties who are interested in providing an offer on a lease post 2032. That process comes to an end mid October, so we will see what bids come to play. The Commission will then look at those bids. There'll be a process of analysing those pieces of work in line with Treasury guidance, and there'll be, at some point later in this year, early next year, the potential to come to a preferred bidder status with an outline business case.

The final business case on the final option will be decided by the next Commission. I don't think there's any timeline that I've seen that makes it possible for this Senedd to take the final business case decision. It will, therefore, be the next Commission and Senedd that will ultimately take that final business case decision. But in order to be able to reach there, which enables us to reach 2032 and have a realistic option of a permanent home for office accommodation for the Senedd, then this process has to be ongoing.

The competitive dialogue process that we've undertaken over the past few months—and is still live, as I said—has been a very engaging and engaged process. I think we're in a strong position as a Senedd, in that we have interest out there. And interest out there means that there's competition and rigour in the options that come to us.

But, currently, as I said, the timeline is that mid October is the next step. We'll need to reflect on that and engage as well on the next steps that the Commission needs to undertake. This is a big decision for the Commission and the Senedd to take, but we need to continually make sure that we have the best value for the public purse at the heart of our decision making on Bay 32.

Thank you, Chair.

Diolch. Over to Julie.

Bore da.

Bore da.

Can you explain in what circumstances the potential right-of-use asset in relation to the Tŷ Hywel building could lead to a need for an in-year supplementary budget and the potential implications for the Welsh consolidated fund?

I could attempt to explain that, but I think others around me would make a better job of explaining what, technically, that actually means.

Yes, it is a technical question.

It is clear in the budget that there could be the potential for a supplementary budget give-back—that's not the word—of quite a considerable sum that's identified in that process. Lisa, do you want to have a go at that one? Yes.

I'll have a go. So, under the accounting standard IFRS 16 we're required to value what we call right-of-use assets on our balance sheet. So, where we have a lease, we have to value that in terms of an asset—the right of use, essentially, to have that asset. There's a corresponding liability that recognises the capital commitments that we have. So, when we first put Tŷ Hywel on the balance sheet, we assumed a 30-year lease period, because although the lease ends in 2032, at that point it was assumed that there was no Bay 32 project. So, it was a reasonable assumption, given our need to be close to the Senedd, that the lease would continue. So, it was valued over a 30-year period.

With Bay 32, with the procurement ongoing at the moment, the aim is that we have a preferred solution, but until a contract is signed, we don't know for certain that that assumption is no longer valid. So, for now we're going to retain it as it is. Next year, if we have a preferred solution, there'll be a new agreement in place from 2032, in which case the right-of-use asset for Tŷ Hywel would shrink until the end of this lease period, 2032, and that effectively reduces our capital liability, which results in a benefit back to Welsh Government.

Right. Thank you.

Put simply, is it cash within accountancy?

It's not cash, it's resource. So, it's viewed as resource, which can be used for other purposes.

But it's not cash.

It's not cash.

We can't decide we want to spend that £40 million on something else.

We can. The Welsh Government can.

So that £40 million is cash.

It's resource, so it's not cash. It's viewed as resource, so it can be repurposed.

Well, can you distinguish between cash and resource?

It's not cash for us. For the Welsh consolidated fund, it's resource.

But it's cash into the system.

Yes.

Right. Thank you very much. [Laughter.]

I'm glad that wasn't attempted by me.

Diolch. I was going to ask you about the Pierhead review project. Will this have any impact on this current financial year or the 2026-27 budget? And what work are you doing on ensuring that the Pierhead is used and provides value for money?

Yes, there is work that's ongoing on establishing what interest is out there, beyond the Senedd, in the use of the Pierhead, and whether that can be utilised wider and used as income generation for the Senedd. We've not yet had—or the Commission certainly hasn't; I don't know whether the staff have seen yet some of the ideas flowing from that. It's not likely to be something that's implemented within this Senedd, but it could be something that's there for the next Commission. It doesn't feature in any way in the budget for next year, but it could do if it's taken on as a piece of work.

At the moment, we're evaluating current usage and coming up with options, and then there will be a moment when that goes to the Commission.

So, are you thinking about keeping its use for the Senedd, but combining it with some income generation? Is that what you're thinking?

Yes, to retain it for primary use by the Senedd itself and as a public building in the context of Cardiff Bay, but also to see where any income generation, additional to what we do, can be materialised if there's an interest out there that's in keeping with the ethos of the Senedd, of course.

It is a great asset, I think.

It is, isn't it?

It's a beautiful building.

In your response to last year's committee report, you mentioned that you were exploring insourcing services such as facilities, catering, cleaning and broadcasting. So, is funding included within this budget to take forward any of that work, or not?

The Commission has decided that it wants to pursue the insourcing of the current contractor-based services and is still committed to doing that. The Commission, though, during this financial year, did pause on commissioning the work from external support that would be needed to enable that to happen within this financial year or next financial year. There is nothing in the budget as it stands to commission the external work in terms of legal support and HR support that would be required to undertake the insourcing.

The Commission supports the insourcing of these projects, but given the complexity of everything that the Commission has been doing over this year, in terms of Senedd reform and Bay 32, the Commission took the decision to pause that work for now. It is not ideal, it is not what I wanted to do, and none of the Commissioners probably wanted to do it in that way, but we felt in terms of the pressure we were putting on the staff and the budget, because we would need to budget for the external specialist services that we would require to actually insource the contracts and take on the staff ourselves, that we would not do that for this budget time.

I just want Ed to reflect on what the next contracts that would come up for insourcing would be and what the timeline around those are, because that was an influential factor in our decision as well.

Yes, absolutely. So, officials recognise the Commission's views and the Commission's statement of principles around insourcing. We've made sure that the procurement timetable for the existing contracts was then structured in a way so that action did flow from the Commission's position, to make sure that we were in a position to take forward insourcing if the seventh Senedd Commission decided to pursue that—that the contract end dates were structured in a way that, as from next year, the catering and cleaning contracts then would fall due and it gives us time to take some strategic decisions and then undertake procurement, or not, depending on the Commission decisions. So, we're structured in a way for the relevant contracts—there are other contracts involved—meaning that, in the first two years of the seventh Senedd, the Commission has time to take a view and then we can start implementing that decision.

Right. So, the decision about insourcing would be made by the next Commission, but you've laid the groundwork in terms of the contracts and things to make that possible to do.

Yes. So, we've laid the groundwork—exactly right—and we've undertaken what we call a phase 1 scoping exercise. As the Llywydd indicated, that exercise indicated that, as we progress through the relevant contracts, the complexity and the risk significantly increases. Some of those services are complex services, with a lot of different moving parts, a lot of aspects to the contracts, and we balance the risk profile against the risk profile that we've already absorbed on the major projects that we're undertaking at the moment.

So, quite simply, the broadcasting and catering contracts are very complex and new areas for the Commission to be involved in directly. Cleaning is a more straightforward contract to insource. So, that complexity and timetabling is part of what we're handing over to the next Commission, but we're doing it in a way that makes it practical for them to take early decisions and steps on this. But it does carry a budget requirement in terms of the specialist intervention that would be needed to the Commission to enable those contracts to do, let alone what the cost would end up being in insourcing and headcount.

Right. Thank you.

Thank you very much for this morning. We've come to the end of our time. Is there anything else that you need to or you'd like to add before we bring this session to an end?

No. Thank you for the opportunity to explain the budget.

No problem. There will be a transcript sent to you, so that you can check it for accuracy. So, we will have a short break now, until 10.45 a.m. Thank you very much again for your time this morning.

Welcome back to this meeting of the Finance Committee.

We'll now move on to item 3, and that's the financial implications of the Building Safety (Wales) Bill. This is the evidence session with the Cabinet Secretary, so could you introduce yourself and your team, please?

Bore da, Cadeirydd. Jayne Bryant, Cabinet Secretary for Housing and Local Government. I'll ask my team to introduce themselves.

Bore da. Adrian Davies. I'm the Bill manager.

Bore da, pawb. Tania Nicholson, deputy director for housing quality and senior responsible officer for this Bill.

Bore da. Audrey Johns, head of building safety occupation phase policy.

Okay. Diolch yn fawr iawn. Welcome this morning. Thanks for coming to talk to us about the Bill, and obviously we've had the Bill, the explanatory memorandum and the regulatory impact assessment. So, we'll concentrate on the financial aspects of this Bill, as we always do. Just to start off, are you able to provide an overview of the Bill and why we need it and where the costs and benefits fall, please?

Diolch, Cadeirydd, and yes, absolutely. So, the Bill is a direct response to the terrible tragedy at Grenfell Tower and the clear evidence that the current system is not fit for purpose. So, the Bill will fundamentally transform safety in multi-occupied residential buildings across Wales, and that's going to bring about comprehensive reform that protects residents and others through regular assessments and proper management of building safety risks.

The analysis in the regulatory impact assessment identifies additional costs to both the industry and to the wider public sector, and these costs are associated, among other things, with the new duties to assess and manage building safety risks across three categories of regulated buildings and relevant houses in multiple occupation. So, there is also a cost to doing nothing as well within this, so, as I said, this is very much a direct response to Grenfell and the subsequent reports that have come out of those inquiries.

How do you respond to some of the comments that were made in last week's Local Government and Housing Committee, from witnesses saying that the total overall costs in the EM and the RIA seem very low?

Diolch. Just to say also that this Bill will be establishing a whole new regime, so that's to ensure the safety of those multi-occupied buildings. There is not a template at the moment for much of what we're proposing, so this goes quite across the piece. So, the RIA presents the best estimates of the costs that we have, and the benefits, based on the information that we have available. And, as you will see, they are based on quite a complex range of working assumptions as well. So, I do understand that it is quite complex.

But just to confirm to the committee as well, and to reassure the committee, we are working closely with partners, such as local authorities, to better understand some of those operational costs of the regime. And that includes looking at the costs of implementation and the work that will be incurred as well. So, that work is running alongside our work in terms of a delivery model, and we've also stood up a work stream to take that forward, and there will be representation from the Welsh Local Government Association and local authorities more widely on that, because we know we need to work closely with our partners there, who will be implementing that.

So, I don't know if, perhaps, somebody wants to—. Tania might want to say a bit about some of the work that's going on closely with them at the moment.

Yes, that would be useful. And could you comment on the external body that you've used as well? I think it's Adroit Economics. And what's been the working relationship between them and your officials, and how involved have they been in producing the RIA and the EM, and how much of it has been your work? And what's that relationship been like?

Yes. I'm happy to sort of clarify that. As I said, the Bill is complex and that's why we have Adroit Economics. They are specialists in this area, they have excellent links with the sector and they have done similar analysis for UK Government as well, so that's one of the reasons why they were chosen.

Just to also say that Welsh Government economists have had oversight of this work as well. They've also been involved with drafting the RIA. Also, Welsh Government officials have tested the analysis with wider stakeholders as well. So, I think we got them involved because they're particularly expert in this area, but to assure everyone that Welsh Government officials have been testing this, and economists have been looking at it as well.

I think it would be useful if officials were perhaps able to talk about the arrangements that they've been doing throughout this. Tania.

Thanks, Cabinet Secretary. So, as the Cabinet Secretary said, the RIA is costing the Bill, what we are doing with partners now is working through the operational model that will flow from the legislation. So, specifically, we've set up two working groups as part of our—. It comes within our governance structure around implementation planning.

So, one of those work streams is looking at capacity within partner organisations, within local authorities in particular, who will be the building safety authority under the new regime set up by the legislation. So, that's looking at what the workforce needs to look like going forward and how we step from where we are now to the future state, I guess.

And then the other work stream that we've set up is around costing. So, it's looking specifically at what the model is going to cost in the future. So, that's both in the short term—. So, the Cabinet Secretary has already agreed some implementation funding for the current financial year, so that's out there with local authorities at the minute. We are looking at what implementation funding for 2026-27 looks like, and we'll be preparing advice for the Cabinet Secretary around that in due course. But then this group is also looking at what the future looks like and what the cost of the operating model will be going forward. So, that work is under way.

Okay. Thank you. The Bill implements change in an area where UK Government and Welsh Government have undertaken a variety of activities, and you talked a little bit about that. Can you explain how this Bill interacts with that activity and what extent are the benefits of the Bill dependent upon activity being taken in other places? And, I think, for example, the work of the £375 million funding Welsh Government has budgeted for repair work. So, can you unpack some of that complexity for us, please?

Diolch, Cadeirydd. And, as you rightly say, the Bill does sit within that wider package of work that's making multi-occupied residential buildings more safe across Wales, and this Bill is one of those key elements. So, it's about the occupation phase of the buildings. And I think, just on a couple of those points, the RIA is assuming that the wider work within that package is making buildings safer. So, we are looking at that in terms of the whole package. And then particularly around remediation, we've put investment there as well. And also, everything is being done to deliver remediation programmes at pace. I know we all, as Members across this Chamber, want to see that happen. That's separate to this Bill, but it's part of that wider package of support.

So, work is under way in relation to design and construction as well. That's around regulation and registration of building control professionals. That's not an assumption that has been directly included in the analysis and, instead, the focus is on that remediation work. So, there is some of that going on, but it is assumed that our remediation work will successfully reduce the external-fire-spread risk by 70 per cent, and that's to the level of risk now. So, for example, category 1 buildings, in the RIA the assumption is that remediation that started in 2020 will take till 2034 to get to that reduction of 70 per cent. So, it assumes that the worst 40 per cent of facades would need to be remediated to get a 70 per cent reduction. Again, for category 2, the assumption is it'll take until 2038 for the worst risk to be remediated, and it would take the worst 40 per cent of buildings to be addressed to reduce that risk by 70 per cent. So, it follows then that measures in the Bill will reduce any remaining risk of major external fire spread further. So, there's a lot in that. I don't know if anybody else wants to pick up on that.

It might be worth adding, Cabinet Secretary, that the benefits report that we shared with you does include some calculations around this. Adroit have looked at common fire types in the different building types as they are at the moment, and then how planned remediation work will reduce the losses associated with those fires, and then a further set of calculations about how our Bill will further reduce those losses.

So, like a two-stage—?

Yes.

Okay. Fine. Thanks for that. In the Bill, it requires accountable persons to take all reasonable steps, including carrying out works to manage building safety risks, and the estimates don't seem to cover the costs of undertaking that work. Why is that? Why does it sit outside the Bill?

The RIA has costed the new processes to be established under the Bill, and the actual management of fire safety risks are already a requirement under the fire safety Order of 2005. So, potential costs of taking steps to manage building safety risks would vary greatly between the different buildings, and that would make it really hard to have a proper estimate, really. So, the building safety risks that are identified are going to include many issues that will already exist in buildings, regardless of the new duties. So, that means the cost of fixing them will include costs that would have been incurred anyway, but perhaps at a later date, and perhaps they might have been higher. So, it is a bit complicated there, but the Bill is intended to ensure that those risks are properly managed and not neglected. So, it should help for us to know who is accountable for those repairs and for doing that. So, any costs incurred in managing those risks could, in fact, lead to avoidance of much greater costs where the risks have materialised, having not been properly assessed and managed in the first place.

So, is this Bill just putting the focus on what was there previously, or is it adding to work that should be—? Is it additional work, or is it, effectively, the business as usual that they should be doing but might not have been doing?

Yes.

A bit of both.

A bit of both. Okay.

It's setting up a new regime around that risk management.

Because part of that would create more cost—

Yes.

—if it's business as usual and it's just monitoring what they were doing. Then, in theory, it shouldn't cost anything extra, because they're already doing it. So, which one is—? How have you—?

The RIA has focused on the new processes that will be set up around the risk management. So, risk identification and management should be happening now. So, that element of the new regime hasn't been costed. It's the processes that will sit around that in the future that have been costed, because that's what the Bill is setting up—the new regime around the identification and management.

Which is more reporting and monitoring, rather—

And registering—

And registering.

—buildings, and that sort of thing, which doesn't exist now, for example. It's that kind of structural regime that the Bill will be setting up.

And that's what we're being asked to look at from this. Okay. It makes it a bit clearer in my head.

Yes.

There we are. Okay. Thank you. I'll bring Sam in at this point. Diolch.

Thank you, Chair, and good morning, all. Thank you for being with us this morning. Sorry, Chair, I should have declared at the start of the meeting that I am a tenant in a high-rise residential building when I'm here in Cardiff, and it's a category 1 building according to the categorisation.

The net costs of the RIA are set over 10 years. It feels a bit strange considering that the RIA notes that benefits could span a 70-year period, and the actions related to this Bill could take 10 to 15 years. I guess the question is: why have you set it over 10 years, and is that appropriate?

Thank you, Sam. The 10-year appraisal period is standard for this type of assessment. However, the actions taken during the 10-year appraisal period are expected to deliver long-term benefits, which would extend beyond the initial 10 years. So, in order to reflect this, and to capture all the benefits associated with the Bill, benefits have been assessed over that longer period of time. I think that approach is in line with the HM Treasury Green Book guidance. But the 10-year period will provide sufficient time for all buildings to have had the safety case report assessed. Risks and mitigation measures will have been identified within that time, and so we expect costs incurred to have reached a steady state within that period. So, I think that there are a number of reasons why we are looking to do that 10 years.

We do know that some of the cost of remediating some of those safety defects, and managing risks, may take longer than that 10-year period, but that's not a cost that we have factored into the analysis, because the assumption is that these are matters that should have been addressed anyway. So, there is a bit of a—. Hopefully, that explains some of the reasoning behind the 10-year assumption.

Okay. Thanks. And did you look or did you consider assessing over a different time period, or were you comfortable that 10 years was the right one to use?

Again, as I said, it’s standard for this type of assessment, and it is in line with the HM Treasury Green Book. But I don’t know if there’s anything else—

I think the Adroit and our economists were both of the view that that was the best time frame.

Okay. Thank you.

It's just that we've had other Bills before us fairly recently that have gone to 70, 80 years, and 30 plus years. It's just how—. It's that consistency. That's why we're asking the question.

Fine, yes.

It's to understand why that was chosen.

It may be a broader question for the Welsh Government to consider, to keep things consistent, so that we can assess as a committee appropriately as well. Thank you for that response.

The RIA says, and I quote,

'The priority is to undertake measures (irrespective of the cost) that will reduce the risk, as far as reasonably possible, to a level that will prevent such an incident'—

the Grenfell Tower—

'from happening again'.

Quite a lot of that seems quite vague to me. You've got 'undertake measures irrespective of cost' and 'as far as reasonably possible' being used in there, and 'to a level that will prevent' something from happening again. So, given such vague language, what assurances or weight do you give to the cost-benefit analysis contained in the RIA and the supporting information?

Thank you, Sam. As the RIA says, we suggest two approaches to considering the costs and benefits within the Bill. So, the first is the cost-benefit analysis, which shows a monetarised benefits gap, and, although the gap may have been reduced, it has been possible to monetarise additional benefits. But, that also should be balanced against an approach that says that the current risk of a similar incident to what we've seen at Grenfell, which we know had, obviously, a significant human cost but also financial cost as well, but an incident similar to Grenfell Tower, although small, is still higher than is tolerable. So, I think we've got a moral responsibility to take action, and that will reduce the risk as far as reasonably possible to a level that will prevent something like the tragedy at Grenfell from ever happening again. And, again, as I mentioned the financial part of the Grenfell Tower risk, we know that the full financial cost of the fire is estimated to be £1.2 billion. So, that is significant. But that, obviously, is without that aspect of people's lives and what they have lost there. So, I give great weight, obviously, to the cost-benefit analysis. It's important that we go into this with an understanding of the likely costs and benefits, but it has to be balanced with that need to understand the true value of preventing a catastrophic event and what happened with the loss of life and property can't really be fully captured in monetary terms. So, it is quite a difficult one, really.

Yes, I certainly accept the spirit in which this Bill is seeking to achieve the change, as you said, to prevent those tragedies happening again. Just from a pure Finance Committee perspective, I'm just wondering, with language such as 'as far as reasonably possible', which is not decisive in terms of laying out what exactly would or should happen, how confident you can be in that analysis, whether it's by the consultants that you engage with or our own officials, and how you can be certain that the cost-benefit analysis being presented to us is accurate when, actually, 'as far as reasonably possible' gives such a broad range of costs, I suppose.

I think, as I said, it is setting up this new system, and I understand the support as well. I'm sure that the committee are making sure—we all don't want to see anything like Grenfell ever happening. I think that's why we have undertaken the work with Adroit Economics as well, who have done some of this expert—. They've got some expertise in this area. That's why our economists are also working closely, and we are testing this with the sector as well. I don't know if Adrian wants to add anything about the conversations, again, that you have with those experts and the economists.

Certainly. I think that the 'as far as reasonably possible' point is a reflection that we don't think that we can completely regulate away the risk, not least because there is a risk that whatever regulations are put in place, people may still—

Ignore them.

—ignore them, yes. So, we don't want to overclaim that it would be an impossibility that something such as Grenfell could ever happen again, but certainly the measures in the Bill are intended to reduce that risk as greatly as possible, and our engagement with stakeholders has certainly led us to believe that the measures we're proposing will do that.

Okay. Thank you. I do accept that calculating some of this can be a challenge. I guess that our job as the Finance Committee is to make sure that the numbers we're looking at are as accurate as possible within this context. So, thank you for that.

Just moving on to some of the specific costs with the policy proposals, the RIA includes high-level costs, and the cost model report provides details on how calculations have been undertaken. However, neither provides a breakdown of the costs by the specific policy requirements associated with the Bill. We're just interested to understand why those specific policy costs haven't been included and how you expect stakeholders to understand the financial implications of those individual policies within the Bill.

Thank you, Sam. While there are individual policy proposals, the Bill, as I said, is being introduced as a whole package. So, the Bill will introduce a new holistic regime. So, there will be no choice to pick and choose which elements people action. So, in that context, we felt that it would be more helpful to see the overall cost of the Bill as that package. However, the modelling has generated cost estimates of some of the specific policy requirements. Again, there are some complex assumptions within that. And we have been bringing that together, and we have that balance to strike between some of the useful information without making the report too dense, going to your point around that being easy to understand.

We have included an example in the RIA around fire safety, and that could be replicated for other policy areas. Again, I'm really keen not to make this even more complex, and, if we are doing that, that it is useful for people to see and to understand. Just again, to reiterate, it's not a stand-alone area—you can't pick and choose this; this will be a holistic regime. But I'm keen to hear from the committee if you do think that that will be useful. If it is helpful, perhaps we could include relevant tables when we publish a revised RIA at the end of Stage 2. So, I'm just happy to hear what the committee thinks on reflection as well.

Yes, that would probably be very useful. If I may—it's a question I was going to possibly ask later on, but—in the same way as looking at costs, you've done a very similar sort of aspect with the benefits as well, with the benefits not being broken down either, which—. As Sam says, we're the Finance Committee, we quite like specifics, so, it's hard to—. I think I'm going to turn into Mike Hedges here and say, 'Show your workings', but it just is hard for us to understand all the moving parts if we don't have that breakdown. So, it's something maybe that you'd want to reflect in a new RIA at Stage 2, but maybe to comment on why that methodology has been—. I know you've explained a little bit of it, but why it's the same on the benefits side as well.

Yes, absolutely. Like I said, I'm very happy to reflect on what the committee has said. But, just in terms of the benefits of individual policies, again, the benefits are particularly challenging to quantify. Again, I think the work that's been done by Adroit Economics, it doesn't allow for the benefits to be attributed to individual policy changes in the Bill; it does assess the whole benefits arising from the whole Bill as a single package of measures. So, broadly, the approach to estimating the benefits has been to estimate the total annual cost of fire and structural failures across Wales in the buildings and how the scope of that could reduce the cost by—. So, it is still challenging, but, as I said, we're keen to hear and understand. You're the Finance Committee, you know, and there's—

But just to have that sort of cause and effect, if you like, or have cost-benefit analysis, really could help us to understand.

Perhaps Adrian—. I'm sort of agreeing to this bit, but Adrian might tell me that it's actually more complicated again.

So, the approach to modelling the cost and the benefit is somewhat different. So, as we've discussed with the cost, we did start with a kind of bottom-up. So, we took each individual policy proposal, worked out a cost for it, and then you sum those to get the total cost, which is primarily what we've presented in the RIA. So, it is relatively straightforward for us to show you more of the workings.

For the benefits, the way the benefits have been calculated is on the whole package of measures. Primarily the reason for doing that is that you have to make an assumption about how much risk reduction will the package of measures give, and we've done that and done the calculations. If you start asking people, 'How much risk reduction will you get from registering the buildings? How much risk reduction will you get from resident engagement? How much risk reduction will you get from doing a fire risk survey?', it's much more difficult to get a consensus around, you know, that'll give you 1 per cent and that'll give you 0.5 percent. And so, the approach we've taken is to make an assumption about the whole package. So, we haven't done the work at the moment that would unpack it. It might be something we could look at, but it isn't in our calculations at the moment.

Basically, can you show us the calculations you've done? You haven't started off with a number at the end, have you? 'This is what we're going to—.' So, can you show us the calculations that got you to that?

Certainly, yes, we can do that.

Sam.

Thanks, Chair, and thanks, Cabinet Secretary, for your willingness to look at how those costs can be broken down and shared. They're already broken down—I appreciate that—but then shared, or made more available. I think part of that thinking is, as a committee, we, from time to time, criticise public bodies or Welsh Government departments for not having three-, five-year plans in front of them. I guess there's the risk that some bodies impacted by this Bill may find it difficult to plan if those things aren't broken down on the impact on their particular costs. And also for investors, private sector investors who want to invest in Wales, they need to be aware of the potential impact for them as well. So, grateful for that response.

Final question from myself, Chair. The cost model report notes that some of the activities are costed using assumptions based on the consultant's judgment. These assumptions are generally rated 'red', which is described as:

'Quality is low—based on clearly stated assumption without direct supporting evidence'.

So, I wonder what you've done to assure yourself around these assumptions, and how confident are you in the resulting costs?

Thank you, Sam. And again, it is complex, and the assumptions are said to be low, because they're not based on verifiable evidence. But, obviously, as I've said, the consultants working in Adroit Economics, they really do have excellent links with the sector. They have expertise in this area and considerable knowledge. So, as far as we can go, their assumptions are generally as reliable as we can possibly expect, really.

Ideally, I would like to draw on published research, but, in the absence of that evidence, we have to base our assumptions on experts, and those experts, as I say, have that experience, really. Officials are looking at the assumptions very carefully, discussing them with Adroit Economics, and we're testing them as well. Officials have been suggesting where there need to be amendments, that amendments are made where they're necessary. Again, we've been trying to test this, trying to validate the assumptions with stakeholders, so it's not like we're just taking that assumption and sitting on it.

In some areas of the regime, the duties proposed are new. So, again, there's no body of evidence to inform our assumptions. I'll give you an example of that. We've got safety case reports; they're a new development. Although they're beginning to be used in England, we're still learning about their work and the work that is involved in implementing those. So, this is an area where the experience of Adroit Economics is particularly helpful because it provides us access to consultants that are working on those safety case reports in England. So, again, it gives you an example of where we are really trying to use those experts when we don't have that body of evidence behind that. And I know that Adrian and the team work really closely to make sure that they are tested.

Can I, perhaps, Chair, just briefly—? Have you as a team or have you, Cabinet Secretary, individually, been surprised at the lack of that body of evidence, considering the Grenfell incident happened eight years ago, or more than eight years ago now, and there were incidents prior to that that had been reported on and had been analysed? Has it been a surprise to you that the evidence hasn't been there to enable you to have more assurances around some of these assumptions?

Yes, so, just to say as well, some of the stakeholders that have been involved in helping us through this, they've been really generous with their time and they have really done a lot to help us, but it would be a lot to expect some of those stakeholders to consider all the assumptions in detail. Again, I think why we're working with Adroit Economics is because of their experience. So, there is work going on. Work has gone on in England. They have access to specialists; some have provided that experience of producing those safety case reports in England and are involved in remediating building safety defects as part of the programme in Wales. So, I think we're building that, or there is that piece of work that's going on now, so we are trying to use that expertise that has been building up over the last few years. Again, it is challenging, isn't it, that there isn't so much of a body of evidence that we're able to focus on, but I think we have the experts available to us who we're trying to use as much as possible. I don't know if there's anything Tania wants to add.

Can I ask how Adroit was chosen? Did you have a few different—? Was there a procurement process followed with—? It's just so that we're aware of how they were, because you're relying a lot on their evidence and their expertise.

There was a procurement process, and we have set up a call-off contract for consultants to do work of this type. So, that would have been open to anybody to apply to go on to the contract, and in order to do so they would have to demonstrate their credentials to do the things that we needed. I think there are a couple of suppliers on that contract, and Adroit are one of them and were awarded this particular piece of work.

It was just for us to be aware of the process, because you're relying a lot on their expertise within this.

Yes, and just to say—. Sorry, Cadeirydd, just also to remember as well we've got Welsh Government economists involved in this, and also, again, we are really testing that, so we're not just taking their assumptions. We are really working hard to make sure that those Welsh Government officials are involved, but also we are testing those constantly with stakeholders, who have a strong interest in this area, understandably. So, we are making sure that what they are telling us is right.

Okay, thank you.

As much we can be, you know.

Yes, of course.

I think that, every time we do estimates, we know they're going to be wrong, but it's how close they are and does everything balance out in the end to get it very close to where you end up being. You estimate that the majority of costs—£115.8 million out of £144.91 million of net present value—will fall to industry. Two questions on that: what discussions have you had with industry bodies, and what happens if we have another Carillion?

Thank you, Mike, and I appreciate those questions. So, industry costs are the costs of complying with a range of additional requirements for buildings in scope, over and above the current situation, so that includes costs incurred by principal accountable persons and accountable persons—you'll get used to the 'APs' and 'PAPs' that I've got used to referring to them as as well.

You're creating a lot of—. What are they called?

Acronyms.

Acronyms in this Bill, anyway.

Yes. So, that's also including social landlords, local authority building owners, as well as landlords of relevant HMOs. Officials have had significant engagement with industry bodies around this Bill, and those industry bodies have recognised the need for steps to be taken to improve building safety and there has been that broad agreement with our policy approach. Officials have discussed the cost estimates with industry representatives, including professionals working in the sector. We have heard concerns that costs may be low, but, as a result of that, we are keeping a very close eye on the assumptions and we will keep that under review. Again, it is really challenging to identify which assumptions might be inaccurate and by how much. This is, after all, a new regime, but, as I say, we are we are keeping that under consideration. We are closely listening to stakeholders and we test their ideas, make sure they are proportionate and workable.

Again, I don't know if officials will want to say more about this example later, but officials have met with organisations such as the Royal Institution of Chartered Surveyors, the Institute of Structural Engineers, the Property Institute and others to discuss the proposals relating to various elements of policy, such as the safety case reports and the inclusion of structural safety duties. So, we're continuing to work with officials on that, but I don't know if anybody else wants to say something, as well as making sure that we're addressing, in a bit more detail, what we do on the last part of Mike's question.

Sorry. The last part of my question. Because Carillion came as a shock, they were a major developer and they were involved in lots of contracts and then they weren't, and that left a big hole that the Welsh Government had to fill in some of the blocks of flats that we've got, including those in South Quay in Swansea. I'm just wondering what would happen if another one of those major developers would actually close down. I know you can't see it happening; we couldn't see Carillion happening.

No. Tania, did you want to say something?

Yes. It's a UK issue, I guess, in terms of the construction industry. Our remediation programme in Wales, as the Cabinet Secretary has said, is progressing, it's growing as well; there are more buildings coming into the programme all the time, as we continue to consider the data. It is a worry in terms of the construction industry. We know that there are capacity issues. I have responsibility within the Cabinet Secretary's department for the remediation programme, as well as for this legislation, and we often hear about the challenges with tenders, for example, not having sufficient capacity for that remediation programme. But it is really important, obviously, that we fix the buildings that have issues currently, as well as what we're trying to do with this legislation in terms of safeguarding those buildings into the future. I noted the point, and it's something that we're really mindful of in our engagement with all of those various partners involved in the different bits of the programme.

I won't take that any further at this stage, Chair.

In terms of the estimated annual cost per building, the RIA said that some or all of these costs, with the exception of enforcement, will be passed on to leaseholders or residents. What analysis have you done about the costs being passed on to residents and the financial burden that the Bill could potentially place on them? And I haven't seen it—you tell me if it's there and I've missed it, so apologies if I have—but what sort of figures are we working to per resident or per flat in a high-rise development?

Thanks, Mike. This is another important area, isn't it? The costs to leaseholders reflect the shared responsibility for maintaining safer homes and buildings, but only reasonable management-related costs can be passed on to leaseholders through service charges. These are subject to existing statutory protections, so the costs will inevitably vary from building to building, dependent on the risks identified. But the estimated average annual cost per residential unit, again, varies by building type. The highest costs arise, as you would imagine, in category 1 buildings, because obviously they have the most extensive duties.

So, for a category 1 building, the cost is estimated to be £275 per unit per year. This is equivalent to 3 per cent of average annual private rent in Wales. For blocks of flats less than 11m high, the cost is estimated to be £31 per unit per year, or 0.3 per cent of average annual private rent in Wales. But they should not be new costs to individuals, so householders in multi-occupied residential buildings should already be subject to costs attached to ensuring the safety of their buildings.

That said, I just want to be clear that we do recognise the pressures on household budgets and the wider cost of living, and that's why we've built a proportionate approach to ongoing consultation to ensure that the regime is both effective and affordable for residents. We'll continue to engage very closely with leaseholder groups and management agents to ensure that the regime is fair, practical, and delivers real improvements.

I'd also like to say at this point that we are considering whether there's anything further that we can do in supporting residents with costs attached to the new regime. So, for example, by requiring landlords to consider other funding options, such as insurance, before passing on any costs in terms of safety risks to leaseholders. So, I am really keen to hear the committee's views in this space as well.

Also, I think it's important to say that RSLs have told us that they are confident that they're already complying with most of those new duties. As a result, this should not be a significant additional cost for residents in social housing. That was something that I saw and heard when I went to Merthyr Valleys Homes. Again, there's some really good work that's gone on there. That was something they were very clear about, and they've put in some particular measures that were really beneficial to residents. They were made to feel safe in their homes as well, and they were. There are some really good examples where, as I say, RSLs are already doing that, and they've told us they are confident that there shouldn't be a significant additional cost. But I'm keen to hear from the committee, because this is something we are all concerned with.

Just on a slightly different matter, with the administrative costs in the RIA, I think the administrative costs come to about £33.42 million, and £25.51 million of that is for the Welsh Government, but I can't seem to find a breakdown of those costs in the RIA based on activity. Does that relate in some way to what we've just been talking about, or is it something different?

I don't think we have one, but we can do that for you, Chair. A very large proportion of the Welsh Government cost is going to be the cost of funding the residential property tribunal to investigate cases that are taken to it as a result of the new regime. That's where the very large majority of the Welsh Government cost goes, and we can provide further detail on that.

That would be useful. I'll go back to Mike about some of the things that the Cabinet Secretary was saying.

A number of my constituents living in Altamar are frightened that the figures could be in the thousands rather than the hundreds. I'm sure that if I had somebody from Cardiff sat in here, they'd be saying exactly the same thing. I think that these figures will come as reassurance to people. Nobody wants to pay an extra £275, but that's about £5 a week. They've been hit by figures of an order of magnitude above that.

The other question is on social housing. Will the costs, if they have to be met, be outside the rent cap?

Is that something we can write to you, perhaps, back on?

Yes. Sorry, I'm not trying to be difficult—

No, no, no—not at all.

—but it is important. Councils have a rent cap, and if they get more money than that, they lose Government support. I don't know how many buildings come in as category 1 that are local authority owned or housing association owned, but if you haven't done it, can I urge you to look at excluding it from the rent cap, because that would make life a lot easier for local government and housing associations?

Yes, thank you. That's a really helpful suggestion as well. Thank you. We'll certainly look into that for you.

Okay. I'll stop there, Chair.

Just on the costs that you're talking about, especially for RSLs but also local authority owned properties as well, you're potentially putting an extra burden on local authorities. Will they be compensated through either the revenue support grant or in some other way from Welsh Government, for the additional work that you're asking them to do?

Thank you, Chair. Obviously, this is something that's at the forefront of our minds, and I know local government minds as well. So, we are working closely with local government on that work stream around the costs. Again, we have invested. We know that there will be upfront costs, and that's why we've put some of that investment in already this year. We understand there will be costs to this. We've signed with local government our strategic partnership agreement, which I'm very conscious of, and the commitments within that. But in terms of other Governments, I can only speak for the one that I'm involved with now and I can't tie everybody's hands in the future. Obviously, there are costs to this, and that is something that we're working hard with local government on as well.

But it's your expectation that bringing work in—

Yes, in addition to the fact that, yes, absolutely, with our commitment in that strategic partnership agreement.

The only thing that will happen is the block grant will reduce, won't it? You haven't got new money. You'll say, 'We're going to give you this £10,000, or £100,000', and the block grant reduces accordingly.

Like I've said, we've put that investment in now knowing that there are costs, because we need local government to be able to do some of this preparation work that they are already doing. But that's why I've seen that that money needs to go to them, to do that directly.

You talked earlier about the benefits and also your visit to Merthyr Valleys Homes, and that people felt as though they were safer in their properties, and I hope they are safer in their properties, because that's what we all want. How do you go about financially quantifying that benefit, because it's qualitative? And how do you bring that analysis into your RIA and build up that benefits picture? Is there a way of using that qualitative data as well?

It is really tricky, but go on.

This is a matter Adroit have been looking at, and they have some ideas about how it might be done. They are working on it.

So, it hasn't been done yet.

It hasn't been done yet. At the moment, we have that as a non-monetised benefit, but we hope in the future we might be able to do some work on it. For people who live in buildings where there has been a fire, there are data about the effect that has on their emotional well-being, and, as a result of that, we have built into our monetised benefits some value for the potential improvement for those people. But for other people who might be affected simply because they recognise that they're in the kind of building where there might be a risk, there isn't at the moment good enough data to put a pound-sign value on that, but Adroit hope to be able to do something on that in the future.

Thank you for that. Part of what you've been talking about is data as well, and collecting that data, and part of the analysis that you've done is based on analysis from England, and Grenfell Tower in particular. How do you marry up the data that you've got there from a high rise in London compared to Welsh communities, and what sort of analysis have you done to make sure that those assumptions travel down the M4, effectively?

Absolutely. And the nature of buildings is very different, isn't it, in central London and other parts of England compared to Wales? That's where we have got our three categories. I very much recognise there are a lot fewer high-rise buildings in Wales. But I think our focus in the Bill is highlighting that we have that difference, and that it's not just high-rise buildings that are at risk, so it's not just limited to tall buildings. I think what happened at the tragedy at Grenfell gives us one worst-case scenario, doesn't it, but, again, I think that Grenfell was just such a catastrophe, as I said, with the human cost and the financial cost.

Again, while we don't want to see anything like Grenfell happening again, it is really difficult because the sorts of routine costs that can be included in the RIA, it's really difficult to quantify those. So, I think it is appropriate to include that in our assessment, but our cost-benefit analysis, like the Bill itself, is rooted in our Welsh context. So, the calculation of benefit draws on that Wales-based data about the nature and the scale of fires that happen, and that we know about within Wales, in those different types of multi-occupied residential buildings.

So, we have estimated the benefits of reducing fires—I think Adrian has set that out a little bit—and the structural safety incidents in the type of multi-occupied residential buildings that we have in Wales. So, we're trying to look at the Welsh context, trying to feed that information that we've got from fire risks in particular, or fires that have happened in Wales, and trying to feed that in in terms of our methodology, really.

Thank you for that; that helps clarify that. With your relationship, then, with the fire authorities and the fire service, with south Wales fire, obviously, you've got the commissioners in, and that aspect of things. What conversations have you been having around the financial aspect of what they're going to have to do, and how are they building that in, because you have the setting of the precept then, which goes as part of a council tax bill? So, have you done any analysis of how that works its way through with this Bill?

Again, they're one part of our—. They're people that we're working very closely with, and, as I said, with local authorities we very much understand the work that's going on, and that we need to go on, with the fire and rescue services. I think one of the reasons this is happening as well is because, as, I think, Steve—one of the officials who leads on this—would say, it does change. At the moment it's a very complex area for people. The focus of the fire safety Orders is around—. It's not fixed to residential buildings; it's more around offices, really. That's where that fire safety Order—. So, I think at the moment it is very much needed that we take a different tack and have this Bill in the way that we are. But I don't know if there's any—

We speak to the fire and rescue authorities very frequently as part of our ongoing engagement with them. They're part of our strategic stakeholder group as well, so there is that ongoing engagement. Specifically in terms of costs, I think the RIA—Adrian, correct me if I'm wrong—has a 1 per cent increase in terms of annual costs.

A fraction of 1 per cent.

A fraction of 1 per cent—0.01 per cent, then [correction: 0.1 per cent]. That's basically because the expectations, as the Cabinet Secretary was saying, in terms of fire and rescue services under the new regime will be as they are currently set out in the fire safety Order, just made more relevant in a residential context. So, in terms of the actual expectations of fire and rescue services, they will be pretty much the same under the current regime as they will be under the new regime. We're not expecting a significant increase in additional work, for example, in the new model.

So, in terms of costs, we're expecting them to be as they are currently. We haven't received strong representations that they will be otherwise, but we are continuing to engage with them as part of the implementation planning work that we're doing.

Okay. Thank you very much. My final question this morning is looking ahead after, hopefully, you get the Bill and it turns into an Act, and the post-implementation monitoring. The post-implementation review says an evaluation of the Bill will begin around three years after the start of the regime, and the RIA says it may take 10 to 15 years before all the improvements to building safety are actioned, and then the benefits model talks about the benefits being measured over 70 years. Those timescales chop and change all over the place. So, given those timescales, what's the appropriate time to assess this Bill?

Absolutely. I think, if the Bill is enacted, we'll be looking approximately four years after Royal Assent, so that'll give us real time to learn lessons from the initial stage of implementation. On the costs associated with the Bill, we will, obviously, be keeping a close eye on all of that through that phased implementation period that we'll have. But, given the longer scale nature of some of these costs and benefits, I think that's why the phased approach is very much needed, and the costs and benefits of the legislation, and how they compare to the estimates presented in the RIA, that’ll be considered in a later phase. But I'd be really keen again to hear the committee's view, perhaps, about how we can have the best approach to that post-implementation review.

So, I think it's fair to say that the new regime will have reached a steady state by 10 years in, but the benefits will be able to be accrued over a much longer period as well. But, again, I’m keen to hear the committee's view on that.

Thank you very much. Are there any other questions this morning? No. Fantastic. Well, thank you very much for your time this morning. With regard to us writing reports and things, we need to write a report fairly quickly, so the things that we've talked about that you're going to supply for us, if we could have them as soon as we can, that would be very useful. Otherwise we won't necessarily be able to reflect them in any report. So, it would be very useful to have that detail as soon as possible.

Diolch, Cadeirydd. We'll try and get you that in a timely manner, knowing the way you will do your report.

We have reporting deadlines that we need to—. So, that's great.

Yes, absolutely. Diolch.

So, I propose, in accordance with Standing 17.42(ix), that the committee resolves to exclude the public from the remainder of this meeting. Is everyone content? I see that they are. Thank you very much.